Indian Startup Sector Faces Capital Hurdles Amid Deeptech Funding Scrutiny
A surge in deeptech investment masks a lack of early-stage support, as Indian venture capitalists face criticism over risk aversion and prolonged due diligence.
Deeptech startups in India are encountering significant fundraising obstacles, despite high-profile successes in sectors like aerospace. While funding in the category rose 176% in Q3 2026, capital remains highly concentrated in established companies, leaving early-stage scientific ventures struggling to secure initial backing. Critics argue that venture capitalists are prioritizing projects with existing commercial traction over genuine technological innovation.
Industry analysts note that traditional investment firms often hesitate to fund deeptech due to long development cycles and the pressure to deliver returns within tight liquidity windows. While government initiatives, such as the ₹1 Lakh Cr RDI Fund, aim to address these gaps, the ecosystem remains reliant on finding investors with a higher tolerance for long-term risk and the ability to provide necessary follow-on capital.
In broader market activity, Inc42 reports a decline in total weekly startup funding to $130.2 million. Meanwhile, regulatory scrutiny continues elsewhere in the tech sector, as Walmart initiates an investigation into alleged kickbacks within Flipkart's operations. Simultaneously, the Indian electric two-wheeler market recorded modest growth, though major players like Ola Electric and Ather saw market share shifts during the month of October.